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Did Earl Howe get any part of procurement law right?

Speaking to the Lords in the final debate on the Coalition's NHS privatisation regulations, Earl Howe made a number of claims about the legislation which has been challenged by campaigners, lawyers, charities and even the Lords' own scrutiny committee. David Lock QC lists ten errors.

David Lock
29 April 2013

Healthcare lawyers have a new game – it’s called “Spot the Errors”. A number of us have been through the speech made by Lord Howe in winding up the debate in the House of Lords on the new NHS procurement regulations on Wednesday 24th April in order to count the legal howlers.  This was, after all, the speech in which the Minister gave assurances given to the House of Lords about how these Regulations would work in practice.

I am told by all who know him that Earl Howe is a genuine chap who is trying to do the best for the NHS, and has an engaging manner. He is not a lawyer and accordingly, in this complex area, he has to rely on the advice of his officials who in turn have to rely on the advice of the Department’s lawyers.  However his speech contained lots of statements that – as a lawyer – I say are just plain wrong. But a health warning: put 2 economists in a room and you get 3 different opinions, so it is perhaps inevitable that lawyers will disagree. But this is my take. Others of course may have a different view on a few of the issues below but I doubt there is much debate about most (if not all).

Error 1: In his opening sentence Earl Howe said “the law that we have not changed one iota is the law relating to competitive tendering” and “It has been governed by a European directive”. Wrong. The relevant EU Directive 2004/18 very substantially does not apply to public contracts for health and social care. There are, slightly undefined, procurement duties imposed by the Treaties but health and social care contracts are entirely outside the Directive but only articles 23 and 35 of the Directive apply to “Part B” services, neither of which are relevant for present purposes.

Error 2: The Minister said “as regards the rules that govern NHS procurement, these regulations usher in nothing new at all”. Wrong. There are no EU rules that impose legal requirements on a CCG entering into an NHS contract with an NHS Acute Trust because these are within the now famous Teckal exemption. The Regulations impose legal obligations on CCGs that enter into such contracts, and so it is misleading to say they usher in nothing new at all.

Error 3: The Minister said “it is NHS commissioners and no one else who will decide whether, where and how competition in service provision should be introduced”. Wrong. NHS Commissioners do not have a general discretion because Regulation 5 requires competition unless there is only one capable supplier of the services.

Error 4: The Minister claimed that Monitor would act as a “firewall between commissioners and the courts”. That is plainly wrong because Monitor has very limited powers under these Regulations. It cannot, for example, give a Direction to require a CCG to hold a competition. If a CCG acted in breach of its duty under Regulation 5, that vacuum would be filled by the courts. Further, section 76(7) provides “A failure to comply with a requirement imposed by regulations under section 75 which causes loss or damage is actionable, except in so far as the regulations restrict the right to bring such an action”. The right to bring a damages action under either these Regulations or the Public Contracts Regulations 2006 is not affected by the Regulations.

Error 5: The Minister claimed that “The circumstances in which a commissioner may therefore award a contract without a competition under the regulations are exactly the same as they have been up to now”. He said that on the basis that the previous government had issued Guidance which was to generally like effect. However commissioners were legally entitled to depart from Guidance if they had a good reason to do so. There is no such discretion when there are legal rules and so the situation is not the same.

Error 6: The relevant Guidance was said by the Minister to be “guidance that was declaratory of public procurement law”. It was not because public procurement law never applied substantively to NHS contracts in the first place.

Error 7: The Minister said “These regulations are declaratory of the existing legal position”. They are not. The words “one capable provider” do not appear in the EU Directive or in the Treaty. The Regulations extend competition to large areas of commissioning where, at present, there are no legally enforceable rules.

Error 8: The Minister said “Elective hospital care is not relevant to these regulations” because he claimed that elective care was provided exclusively under the “Any Qualified Provider” system. Wrong. Not all elective care is covered by AQP and there are still acute services contracts between CCGs and hospitals that cover a whole range of services. Contrary to the impression given by the Minister, acute services contracts fall within the scope of the Regulations.

Error 9: The Minister said that there have been no cases about NHS Procurement that have gone to court in recent years. Those of us who were involved in the Gloucestershire case, which occupied the High Court for a full day before Gloucestershire threw in the towel, might beg to differ with that statement.

Error 10: Lord Hunt as part of his legally accurate and impressive speech, questioned why there was no financial limit below which the Regulations would not apply. The Minister said “Where the value of a contract is such that it would be disproportionate for the commissioner to hold a tendering exercise, there is no requirement under the regulations or the law to do so”. Wrong. There is no basis in the Regulations to support the suggestion that the legal duties imposed by the Regulations are removed where there is a low contract value.

There are other errors that other lawyers might have spotted but these are my top ten.  What is particularly disappointing is that Lord Tim Clement-Jones, who is himself a lawyer, was taken in by this legal nonsense and played the man and not the ball. He used his speech to attack the credibility of those of us who drew attention to the problems with the Regulations and then contented himself with accepting the legally indefensible proposition that these Regulations did not change the law to any material degree. That is politics and was accepted by the House of Lords but I suspect it is not a submission that would have been accepted in any court. The legal process is far more forensic than the parliamentary process.

There is no legal remedy for Earl Howe having so spectacularly failed to understand the law which lies behind his own Regulations. Perhaps he should be asked to come to the House of apologise for having misled their Lordships, but I doubt that will happen. However I pity the poor Treasury Counsel who, in the midst of a legal challenge concerning the meaning of the Regulations, is encouraged to defend the government’s view of the effect of the Regulations in accordance with this speech.  For legal purposes, I strongly suspect Earl’s Howe’s speech will be left as “unused material”.

This article originally appeared at David’s blog, NHS Rationing, cross-posted with thanks

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